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Socialism vs Capitalism... Revolution or Evolution Part Two

December 18, 2017

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The Industrial Revolution- (18th and 19th century Europe, and the United States.) 


There are several versions of how the industrial revolution actually began, but for the sake of argument we are going to follow the most common thread since it is also the most verifiable one.


In 1733 a British engineer and inventor named John Kay 1704 – c. 1779 invented a yarn spinning device called the flying shuttle that dramatically reduced the time needed to produce yarn (or thread). With this increased availability of the main resource needed for textiles, the demand for yarn exploded creating a necessity for even more efficient ways to not only spin the yarn, but of turning that yarn into woven material as well.

In 1764 a man named James Hargreaves, in Lancashire England, rose to the challenge inventing a multi spindle spinning frame called the spinning Jenny. (Say that one ten times real fast!)

This device greatly increased how much yarn could be produced within a certain time frame. The first spinning Jenny could spin up to eight threads at a time. The most advanced version the spinning mule could make over 120 threads at a time. In essence, one person could now produce the same amount of thread as 120 people could by hand within the same amount of time. Most thread and yarn factories would have dozens of these machines in operation.


As you can see in the video below, this machine was a truly amazing feat of engineering given the  limited technology of the time. VIDEO ONE



The biggest problem facing not only the textile industry, but almost all industry of the time was the ability to power these new machines. Their options were limited to beasts, people, wind, or moving water with the latter being the primary source. The amount of power that could be produced by these methods eventually became insufficient as the machines became ever larger and more complex. The reliance on water for power also heavily restricted where these factories could be located.


This barrier was shattered in 1782 by Scottish inventor James Watt and his improved version of a 1712 steam pump invented by Englishman Thomas Newcomen. This reliable and cost efficient engine undeniably played a major role in igniting the industrial revolution.


James Watt's Genius: Boulton & Watt Rotative Beam Engine 1788 VIDEO TWO







It was also by default instrumental in providing the perfect atmosphere for the evolution of a free market economic system called capitalism. Why do I say the evolution of capitalism? Evolution is the gradual process of transforming from something simple, into something more complex. So we can easily follow the thread.


As covered in part one.


Prior to the Neolithic era or new stone age around 10,000 BC and the agricultural revolution, humans lived a primarily nomadic hunter gatherer lifestyle. These (tribes) were communal in social structure with all resources being shared among all members of the tribe. We know this is true because humans would not have survived otherwise. There are also the several million artifacts that archeologists have uncovered that lend support as well. Just sayin.


There was most likely no real form of government, and any trade was likely based on the barter system. A fair exchange of goods that are deemed to be of equal value by both parties involved rather than money.


The development of agriculture by necessity, spread everyone out resulting in an agrarian society based more on individualism than the previous communal society based on collectivism. This allowed those with the most wealth and power to seize control over vast amounts of land that needed to be worked, and protected, giving rise to the age of monarchies, and feudalism. A system where land was awarded for military service to the nobility. This land was called a manor under the rule of the land owner or noble and was governed under the system of Manorialism which was basically a pyramid style economy that dates back to the late Roman empire.


It was during this era beginning somewhere between the 5th and 9th century to the 15th century that our society was split into the socioeconomic classes that continue in various forms today.


This system then evolved into mercantilism (based on a government controlled market) through international trade during the 16th and 17th century, eventually evolving into what we call a free market, or capitalism in the 18th and 19th century during the industrial revolution. 


Before moving on, take a few minutes and watch this rare footage from the late 1800's. It really gives you a feel for the time period we are looking at. VIDEO THREE



All of the advances in machinery that increased our ability to produce more and more goods would never have impacted our society as it did without one thing, capital, or money, and lots of it. These machines needed to be designed and built, structures large enough to accommodate them needed to be constructed which meant land had to be acquired to build them on. And then you need the second most important factor for all of this to happen, labor. From design to construction, transportation to implementation, all of these tasks require people to perform them. Labor is after all the ground floor of any economic system.


During the middle ages and Manorialism under the monarchies, most of the available wealth and control over the means of production had been funneled into the hands of a relatively small amount of people. These became the capitalists during the industrial revolution. Whether they were individuals, the church, corporations, or governments, they invested large amounts of money into these burgeoning industries with the expectation of future profits. They were called capitalists because they capitalized on a new concept within economic theory, the free market whose foundations had been laid by Scottish philosopher and economist Adam Smith 1723 - 1790. Smith also holds credit for the concept of division of labor, and being considered (although arguably) the father of modern political economy. Smith introduced the concept of Laissez Faire Capitalism which ultimately became the standard in most countries. 


Free trade or Laissez Faire capitalism which is French for "leave alone" is based on the concept that if allowed to run its natural course, the market will constantly adjust to any fluctuations in supply and demand maintaining economic balance and prosperity.  All we have to do is leave it alone. 


Yeah, that didn't happen.


The problem as I see it was that we got ahead of ourselves. The industry and thereby the capitalists were pumping massive amounts of money into the market, before the government had a solid plan of what to do with the money coming out of the market. The concept of the political economy was still being refined as the market forced it into being implemented. While government scrambled around trying to catch up with the game, the capitalists (who became corporations) saw an opportunity (since they were basically unregulated in any way), to greatly increase their profits.


Using aspects of the holdover system of Manorialism, and the new concept of division of labor, corporations became their own mini monarchies with the masses of poor working class people as there peasants. They simply carried on the exploitation of the lower classes that had began centuries ago in the middle ages. Except that now, far less people were needed to meet production goals. Thousands suddenly found themselves unemployed as machines replaced them in almost every industry.


The greatest motivation for this exploitation was of course greed. The business owners constantly tried to find ways of increasing profits while cutting costs. Since overhead (the fundamental cost of doing business) is basically a fixed cost, meaning it can be changed very little, and separate from labor cost, the only other place to cut these costs came through low wages and long working hours. Maximum production at minimal cost.


By doing this the capitalists forced the lower classes into the position of being economic hostages.


With wages that barely allowed them to survive they had zero chance of improving their station in life. Many of these corporations built specified housing blocks or tenements on land that they owned to house their workers. This of course meant that the workers had to pay rent to the corporation out of their already meager earnings. Some corporations even tightened their control over these people by paying them in company currency, instead of actual cash that could only be spent at company owned stores. These stores of course charged higher than average prices since the workers had no choice but to shop there. The tenements quickly devolved into the rancid slums growing on the underside of every city.


For millions, this led to an existence far different than those in the video above enjoyed. A very dark and oppressive existence consisting of little more than survival within these city slums.


Keep in mind when watching the photo essay below, that many of us from European decent are getting a glimpse into the lives of our own immigrant ancestors.


Video: New York City circa 1860 - 1910 VIDEO FOUR



Beyond the poverty, disease, and crime of their environment, workers lives were literally put on the line every day that they work. Especially the children forced by poverty into employment who were small enough to crawl into the machines and unjam them. Industrial accidents claimed the lives and limbs of thousands with no compensation from the company, they were simply replaced and left to their own devices. Most of the factories these people worked in were also fire traps due to shoddy construction materials, and location of exits. Many only had one way in or out with hundreds of people within. Due to the close quarters in which they worked, disease spread rapidly through the population. From what I could gather though, one of the most common form of injury and illness was heat related, including fatal heat stroke. Try to imagine being packed into a room designed for twenty persons with a hundred other people with little ventilation, add to that the heat of the machines for 14 - 16 hours a day. Sweatshop may be too kind of a word for those conditions.


People were paying attention to all of this though, and had been for a long time. Philosophers like John Locke 1632 - 1704 who is considered to be the father of liberalism, could see how the free market could be abused by those who held the majority of  the wealth. His works influenced Adam Smith, whos works later influenced a British political economist named David Ricardo 1772 – 1823. Ricardo's socioeconomic and political theories became known as Ricardian Socialism, regarded by many to be the first fully organized socialist movement.


In 1817 with his work  Principles of Political Economy and Taxation he introduced his labor theory of value.  


"The value of a commodity, or the quantity of any other commodity for which it will exchange, depends on the relative quantity of labor which is necessary for its production, and not on the greater or less compensation which is paid for that labor."


Ricardian socialists took this to mean that all labor is entitled to all it produces with private ownership of the means of production being replaced by cooperative worker associations. This was based on Ricardo's belief derived from Adam Smith, that labor was the source of all wealth. This theory morphed into market socialism which was basically a compromise between social planning and the free market. They were trying to find a workable balance between the two. Market, or liberal socialism became a driving force behind the development of labor unions, and collective bargaining as a way to improve workers rights and safety.


The beliefs of the Ricardian socialists were highly popular and gained a lot of support by other economists world wide who could see the potential in a cooperative existence between socialism and the free market.


There were many though who did not seek compromise, and had no interest in letting our socioeconomic status or the free market evolve naturally. It is important to realize here that to the people of this time, the centuries of oppression under the manorial system was still very fresh in their minds. To many of them, capitalism was simply a continuation of that same system. The same people still held all of the power. Well, they were partly right.


The same people did hold the power because they had the money that came out of those centuries of oppression under Manorialism. As I stated above during the industrial revolution, the capitalists ceased to be people and became corporations that modeled their internal structure after the only system they knew worked, the pyramid of Manorialism.  


Capitalism did not create the classes, or the inequality, since that happened several hundred years before it or a free market were even an idea yet. The past could not be changed, so people needed a tangible an